The Real Estate Development Marketing Act applies to developers who market various types of real estate developments that are included in the definition of development property. Marketing is defined in the Real Estate Development Marketing Act as selling or leasing.

The Real Estate Development Marketing Act is intended to protect the public by ensuring that the appropriate and necessary steps are taken in relation to the development of the property; that the developer has sufficient financing to ensure that the title and services will be in place at the time of transfer, and that the developer deals with purchasers’ deposits appropriately. Additionally, the Real Estate Development Marketing Act protects the public by requiring that developers disclose specific information about the development property to prospective purchasers. This requirement is satisfied by the requirement that developers file a Disclosure Statement with the Superintendent of Real Estate and provide a copy of the Disclosure Statement to prospective purchasers.The Real Estate Development Marketing Act is administered by the Superintendent of Real Estate. If you have questions about the Real Estate Development Marketing Act, please contact the Office of the Superintendent of Real Estate — will open in a new tab.

Real Estate Development Property

(a) 5 or more subdivision lots in a subdivision, unless each lot is 64.7 ha or more in size;

(b) 5 or more bare land strata lots in a bare land strata plan;

(c) 5 or more strata lots in a stratified building;

(d) 2 or more cooperative interests in a cooperative association;

(e) 5 or more time share interests in a time share plan;

(f) 2 or more shared interests in land in the same parcel or parcels of land;

(g) 5 or more leasehold units in a residential leasehold complex;

Unless an exemption applies, sections 3 — will open in a new tab and 14 — will open in a new tab of the Real Estate Development Marketing Act require the filing of a Disclosure Statement before a developer markets a development unit. The Real Estate Development Marketing Act defines a development unit as any of the following in a development property:

(a) a subdivision lot;

(b) a bare land strata lot;

(c) a strata lot;

(d) a cooperative interest;

(e) a time share interest;

(f) a shared interest in land;

(g) a leasehold unit.

The definition of development unit and the corresponding requirement that a Disclosure Statement be filed before a development unit may be marketed confirms that even the marketing of one property may trigger the requirement for a Disclosure Statement if the property is located within a development property. For example, if a developer owns five or more strata lots in a stratified building but intends to market only one strata lot, the developer is marketing a development unit in a development property. Before marketing a development unit, the developer must comply with all the requirements of the Real Estate Development Marketing Act, including, the need for a Disclosure Statement.

Licensees acting for developers should verify that the developer is in compliance with the requirement of the Real Estate Development Marketing Act generally, and specifically, that a Disclosure Statement has been prepared and filed before offering any property for sale that meets the definition of a development unit.

In the past, RECBC has disciplined licensees for offering land for sale prior to the filing of a Disclosure Statement.

Exemptions

The Real Estate Development Marketing Regulation sets out a number of exemptions from the requirements of the Real Estate Development Marketing Act. The sales of properties covered by the exemptions do not require the filing of a Disclosure Statement and are exempt from the requirements with respect to the manner in which deposits are handled.

Exemptions apply to the following transactions:

Marketing between developers

The marketing of development property in a single transaction.

Developments used for industrial or commercial purposes

Development property that is within an area that is zoned for only industrial or commercial use, and is used and advertised only for industrial or commercial use.

Development property that is located within a comprehensive use zoning that includes residential use, but the property is used and advertised only for industrial or commercial use, if the developer notifies prospective purchasers that the protections of the Real Estate Development Marketing Act and the provisions of the Real Estate Development Marketing Act requiring Disclosure Statements and the manner in which deposits are handled do not apply.

Leases of three years or less:

Leases of development units where the term of the lease (including options or covenants for extension or renewal) do not exceed three years.

Sales or Leases Subject to the Securities Act:

Development property for which the developer has filed a prospectus under the Securities Act and complies with the requirements of the Securities Act relevant to the marketing of the development.

Subdivisions within a municipality:

Marketing of subdivision lots within a municipality if the developer has complied with the requirements of the Local Government Act or Vancouver Charter regarding servicing agreements and subdivision control and has deposited any security that the municipality may require.

Continuing exemptions:

Developments previously exempted from the need for a Disclosure Statement.

Low equity cooperative interests:

Cooperative interests if the acquisition cost to the purchaser is $5,000 or less.

Disclosure Requirements

If a development unit is not exempted, section 14 — will open in a new tab of the Real Estate Development Marketing Act requires that before marketing a development unit, the developer must prepare and file a Disclosure Statement with the Superintendent of Real Estate. The Disclosure Statement must be in the form and include the content required by the Superintendent and, without misrepresentation, plainly disclose all material facts.A developer may not enter into a purchase agreement with a purchaser for the sale or lease of a development unit unless a copy of the Disclosure Statement has been provided to the purchaser, the purchaser has been afforded an opportunity to read the Disclosure Statement, and the purchaser has signed a written statement acknowledging that the purchaser had an opportunity to read the Disclosure Statement. The Real Estate Development Marketing Act requires developers, or licensees offering the property for sale on the developer’s behalf, to retain the written statement from the purchaser for a period of three years.

It is not acceptable under theReal Estate Development Marketing Act to create a ‘‘subject to’’ clause to the effect that the offer is subject to the buyer receiving, reading and approving the Disclosure Statement. It is also not acceptable for a term to be created in the contract, which states that the seller will provide a copy of the Disclosure Statement to the buyer.

Licensees should ensure that the proper procedure has been adhered to when selling properties which require a Disclosure Statement, as improper compliance with this procedure could result in the buyer being able to revoke the offer and, subsequently, could result in the seller taking legal action against the licensees involved.

Disclosure Receipt Clause

The Buyer acknowledges having received and having had an opportunity to read the developer’s Disclosure Statement.

The Superintendent’s office has prepared a number of Policy Statements which set out the requirements for the Disclosure Statement for each type of development property. The Policy Statements require that the content of each Disclosure Statement must be set out in the order prescribed in the Policy Statement.

The Real Estate Development Marketing Act requires that if the developer becomes aware that the Disclosure Statement contains a misrepresentation, the developer must file either a new Disclosure Statement or an amendment to the Disclosure Statement and provide copies to new purchasers and to those who have entered into a purchase agreement but who have not yet received title or the interest for which the purchaser has contracted. A new Disclosure Statement must be filed if the identity of the developer has changed, or a receiver or liquidator has been appointed.

Forms of Development Property under the Real Estate Development Marketing Act

Cooperative Interests

A cooperative interest is the interest that includes both a right of ownership in the shares of a cooperative association or to be a partner or member in the cooperative association and the right to use or occupy a part of the land in which the cooperative association has an interest.

The Real Estate Development Marketing Act defines a cooperative association as

(a) a corporation, as defined in the Business Corporations Act;

(b) a limited liability company as defined in the Business Corporations Act;

(c) a partnership; and

(d) an entity incorporated or other wise created outside British Columbia that is similar to one described in paragraphs (a) to (c).

Thus, an owner of a cooperative interest acquires shares, or some other form of ownership in a corporate entity or partnership, which carry with them the right to occupy only a portion of the land that the cooperative association owns. The particular portion may be an apartment or a recreational vehicle site.

Sellers are unable to carry primary or secondary financing on cooperative interests by way of a mortgage registered against the title or by an Agreement for Sale, as there is no title in a cooperative interest to encumber. It is, therefore, strongly recommended, in a situation where the seller is asked to carry any financing, that the seller’s lawyer and the buyer’s lawyer be consulted before the acceptance of any offer.

Licensees are also advised to consult their financial advisers, including experienced mortgage brokers, for guidance in such financing, as well as ascertaining from the cooperative’s rules and regulations whether or not there is a prohibition on financing in any way.

A Disclosure Statement must be filed with the Superintendent of Real Estate before a developer or a developer’s agent can market one cooperative interest if the cooperative interest is part of a development consisting of two or more cooperative interests. Accordingly, licensees involved in the sale or purchase of a cooperative interest by or from a developer should familiarize themselves with the content of and the requirements associated with the Disclosure Statement. It is possible for a cooperative association to own a strata lot. Hence, the Strata Property Act may also be applicable.

Regardless of whether the transaction involves a developer or a single unit resale, licensees should be knowledge- able with respect to the proportion of the share capital acquired by the purchaser, the allocation of ongoing maintenance and operating costs, the presence of any other assets or liabilities that the cooperative association may have, the terms of the agreement which restricts an owner to using only a portion of the land that the cooperative association owns, the applicability of the homeowner’s grant and property transfer tax, and the particulars of the cooperative association’s share capital, such as provisions related to voting rights or restrictions on transfer.

Rental Leases and Head Leases

Another type of ownership, which fits between cooperative and strata on leased land, is the rental lease, where the cooperative building sits on leased land. It is financed like a cooperative, although sometimes private leaseholders will allow for less down payment and provide financing directly themselves. The holder of the head lease, the corporation which owns the building, determines how units in the building are purchased. As with cooperatives, these are purchases of shares in exchange for the exclusive right to occupy a designated unit in the building. Owners do not have title to the unit itself. Owners must not make alterations to the unit (unlike strata ownership) without permission from the cooperative association. These are long-term leases (often 99 years). Licensees are advised to consult experienced financial advisers, lawyers and mortgage brokers for guidance.

The following clause should be used in the purchase of cooperative interests. This clause may also be used for the purchase of rental-lease properties but it is strongly recommended that the buyer seek legal advice and ensure understanding of the head lease’s restrictions and duration.

Co-operatives-Suite/Townhouse Clause

This contract is for the purchase of (number of shares) shares in (name of co-operative association) together with a lease of (unit number) to the Buyer, and other considerationsas may accompany said lease.

Buyer to assume payments of the monthly maintenance charge of $(amount) (which includes aproportionate share of annual taxes).

Subject to the approval of the Buyer by the Board of Directors of (name of co-operative association) on or before (date) .

This condition is for the benefit of both the Buyer and the Seller.

Buyer has approved the Rules and Regulations, the Memorandum and Articles of Association, any lease documentation and any financial obligations of (name of co-operative association) includingthe following specific restriction(s):

Ώ Warning re Approval of buyer by Directors: The Board of Directors of a Cooperative is allowed to make a decision as to the suitability of any buyer. The reasons for such a decision are to be kept confidential to the Board of Directors.

Optional Assumption of Portion of Mortgage Clause

NOTE: The Buyer should obtain legal advice before assuming a mortgage in these circumstances.

Buyer will assume obligations on an assigned portion under the existing first mortgage held by (name of mortgage lender) registered against the property at (address) with an outstandingbalance on the assigned portion of approximately $(amount) at an interest rate of ___% per annum, calculated (frequency), not in advance, with an original (number of years)-year amortization and a ‘‘balance due” term date of (date), with blended payments of $ (amount) per month including principal and interest.

Shared Interests in Land

A shared interest in land is a person’s interest in one or more parcels of land, if the parcel or parcels are owned or leased by the person and at least one other person and as part of any arrangement relating to the acquisition of the person’s interests, that person’s right of use or occupation of the land is limited to a part of the land.

Thus, an owner of a shared interest in land acquires a direct ownership interest in land, typically an undivided fractional fee simple interest, which carries with it, by agreement amongst the co-owners, a right to occupy only a portion of the land.

A Disclosure Statement must be filed with the Superintendent of Real Estate before a developer or the developer’s agent can market one shared interest in a development containing at least two shared interests. Accordingly, licensees involved in the sale or purchase of a shared interest in land by or from a developer should familiarize themselves with the content of and the requirements associated with the Disclosure Statement.

Regardless of whether the transaction involves a developer or a single unit resale, licensees should be knowledge- able with respect to the proportionate fractional interest acquired, the allocation of ongoing maintenance and operating costs, the applicability of the Homeowner’s Grant and Property Transfer Tax, and the particulars of the agreement which restricts owners to using only a portion of the land that they own, such as voting rights or restrictions on transfers.

Time Share Interest

A time share interest is defined in the Real Estate Development Marketing Act as a person’s interest in a time share plan. A time share plan is a plan in which the persons participating each have a right of recurring use, of all or part of the land. A time share plan does not require that the persons acquire an ownership interest in the land that is the subject of the plan.

A Disclosure Statement must be filed before a developer may market one time share interest in a development containing five or more time share interests. Accordingly, licensees involved in the sale or purchase of a time share interest by or from a developer should familiarize themselves with the content of and the requirements associated with the Disclosure Statement.

Real Estate Securities

In some cases, the offering of a real estate development unit may constitute the offering of an investment contract, which is a security within the meaning of the Securities Act. Where a real estate development includes an interest in land and an ancillary agreement, usually with the developer, for management of the property, combined with financial commitments such as rental guarantees or revenue and expense pooling, the arrangement may meet the requirements of a security. A typical example of such an offering is the marketing of strata lots in a hotel or resort in which there is an agreement that the strata lots will be rented out by a manager. The agreement may include a rental guarantee or revenue or expense pooling, or it may simply be a mandatory requirement that the strata lot be provided to the manager for rental as part of the overall development. In such cases, both the Real Estate Development Marketing Act and the Securities Act apply. Policy Statement 13 – Real Estate Securities — will open in a new tab issued by the Superintendent’s office sets out an explanation of real estate securities and includes reference to the related documents issued by the Securities Commission. Licensees involved in the purchase and sale of real estate offerings, where the purchaser must rely on the promoter for an investment return, should familiarize themselves with these requirements.

Leasehold Units

A leasehold unit is a unit in a residential leasehold complex which is defined as containing one or more buildings capable of being used for leasehold residential purposes other than buildings comprised of strata lots, cooperative interests or shared interests in land.

Although not specifically identified in the Real Estate Development Marketing Act, a common form of leasehold unit that has been marketed in British Columbia is a life lease. A life lease in its broadest sense is a leasehold interest in land, the term of which extends for the life of the lessee. In many ways, it resembles a life estate. In particular, life leases typically must prepay a large portion or all of the rent, and the possessionary interest of a life estate and a life lease both terminate with the life of the person holding the interest. However, a life estate is a freehold interest in land whereas a life lease is a leasehold interest in land that creates a landlord and tenant relationship.

The distinction between a life lease and a life estate should not be forgotten because a life lessee is subject to a lease. Accordingly, most, if not all, aspects of the law governing landlord and tenant relationships will apply and licensees should be aware of their duties and responsibilities, which apply to all lease transactions. The following characteristics of many life leases should also be considered.

Most, if not all, life lease offerings obligate the landlord to repay some or all of the prepaid rent to the lessee, or his or her heirs, on the death of the lessee or the termination of the lease. The obligation to repay the rent (capital payment) results from the contractual terms of the lease. The repayment term is basically peculiar to life leases. Licensees should familiarize themselves with the security arrangements, if any, associated with the obligation to repay and the financial ability of the landlord to make the repayment.

Additionally, landlords can generally terminate a life lease for non-payment of rent or a breach of any other covenant in the lease. The life lease may or may not be registrable. Section 4 of the Residential Tenancy Act provides that the Act does not apply to living accommodation rented under a tenancy agreement that has a term longer than 20 years. Life lessees generally may not assign or sublet their lease as the landlord typically controls the renting of the premises. Life leases generally obligate the lessees to pay monthly charges related to the maintenance and operation of the development. Often, these charges are payable as rent.

The Real Estate Development Marketing Act requires that a developer file a Disclosure Statement before marketing a leasehold unit of a term of three years or more in a development property containing five or more residential leasehold units. All long-term leases, including life leases contained within developments other than buildings comprised of strata lots, cooperatives or shared interests, are subject to the requirements of the Real Estate Development Marketing Act. Because the marketing of strata lots, cooperative interests and shared interests are specifically addressed in the Real Estate Development Marketing Act and because the definition of marketing includes selling or leasing, the offering of a long-term lease of a strata lot, cooperative interests or shared interests already requires compliance with the Real Estate Development Marketing Act.

Each offering of a leasehold interest, including a life lease, requires that a current Disclosure Statement, which has been filed with the Superintendent of Real Estate, be provided to the lessee. Developers may therefore be required to update the Disclosure Statement to ensure that it is current before each new leasehold interest is marketed. In other words, as lessees die or otherwise terminate their lease, the developer will offer a new leasehold interest which requires an up to date Disclosure Statement. Developers reselling life leases must therefore provide a current Disclosure Statement to new lessees.

Market Testing Prior to Filing a Disclosure Statement

The Real Estate Development Marketing Act prohibits marketing of development units unless a Disclosure Statement has been filed with the Superintendent of Real Estate. The Policy Statements prepared by the Superintendent’s office describe ‘‘Marketing’’ as ‘‘engaging in any transaction or other activity that will or is likely to lead to a sale or lease’’.

The Policy Statements indicate that the use of ‘‘letters of intent’’, ‘‘priority lists’’, ‘‘reservation agreements’’, ‘‘conversion rights’’, ‘‘rights of first refusal’’, or any similar agreement that carries with it the right to acquire a

development unit, falls within the meaning of marketing. Licensees should be very careful to avoid the use of such agreements and to avoid receiving any deposits prior to the filing of a Disclosure Statement.

The Policy Statements permit developers to advertise a proposed development and communicate with potential purchasers as long as potential purchasers do not gain the impression that they have a right to acquire the development unit. To avoid confusion, the Policy Statements recommend that every advertisement contain the name and address of the developer, the telephone number of at least one representative from whom information and a Disclosure Statement (when available) can be obtained, and a prominent disclaimer stating that the advertisement is not an offering for sale and that such an offering can only be made after filing a Disclosure Statement.

Early Marketing

The Real Estate Development Marketing Act permits developers to begin marketing development units prior to meeting the requirements for approvals and permits if the developer has received approval in principle to construct or otherwise create the development and the permission of the Superintendent of Real Estate to begin marketing.

The Real Estate Development Marketing Act also permits developers to begin marketing development units prior to meeting the requirements relating to the assurance of services if the developer satisfies the requirements established by the Superintendent in a policy statement.

Licensees should be aware that in both cases, any Contract of Purchase and Sale entered into by a buyer must:

be terminable at the option of the buyer for a period of seven days after receipt of the amended Disclosure Statement if the building permit materially changes the layout or size of the applicable development unit, the construction of a major common facility, including a recreation centre or clubhouse, or the general layout of the development;

if an amendment to the Disclosure Statement that sets out the particulars of the building permit or financing was not received within 12 months after the initial Disclosure Statement was filed, be terminable by the buyer until an amendment is filed;

require that no greater than 10% of the purchase price be paid by way of deposit or other wise; and

require that all such funds including, where applicable, interest earned, be returned to the buyer forthwith upon notice of cancellation by the buyer without deduction.

Pre-Sale Contracts

Developers in British Columbia commonly pre-sell residential units such as strata titled apartments and townhouses. These ‘‘pre-sales’’ include any residential unit that is purchased prior to the completion of construction. Typically developers enter into contracts that provide for units to be built within two years at a fixed price, and require deposits to be paid by the prospective purchasers. The deposits are held in trust by a lawyer, notary public or real estate brokerage, unless deposit protection insurance is obtained, in which case the deposits may be released to the developer. If a proposed development does not proceed and the purchase contract is terminated, pre-sale purchasers are entitled to have their deposit money repaid.

However, unless the pre-sale contract requires interest to be paid, the purchaser may not receive interest on that deposit. This is something that a purchaser will want to clarify at the time that they enter into a contract.

Obtain Professional Advice

In order to better understand the development, the prospective purchaser may wish to consult with a real estate licensee before entering into any contract. A licensee can explain real estate terms and practices and provide information about available properties in the purchaser’s price range. Additionally, prospective purchasers may wish to consult a lawyer to better understand their rights and obligations in respect of an existing or proposed pre-sale contract. A lawyer will be able to provide advice with respect to the purchaser’s responsibilities under the contract, including any termination or extension rights.

Review the Disclosure Statement

A prospective purchaser should carefully review the developer’s Disclosure Statement. TheReal Estate Development Marketing Act provides that a developer must not enter into a contract to sell a development unit unless a copy of the Disclosure Statement has been provided to the purchaser and the purchaser has been given a reasonable opportunity to read it. The Disclosure Statement explains what the developer is selling and describes the purchaser’s right under the Real Estate Development Marketing Act — will open in a new tab to cancel the pre-sale contract within seven days of signing it. It is important for prospective purchasers, who either already have a pre-sale contract or are considering entering into one, to appreciate the risks associated with them. Some of these risks are explained below. There may also be other risks, depending on the specific terms in the pre-sale contract and the specific circumstances of the development.

Pre-Sale Risks

A proposed development may be delayed, or may not proceed at all, for a variety of reasons including: inadequate sales; delays in obtaining financing or building permits; higher than expected costs for construction materials; and an inability to hire skilled construction workers.

If a proposed development is delayed beyond the completion date set out in the presale contract, the contract may provide that it is terminated unless both the purchaser and developer have agreed to an extension. If market prices have increased during a delay in construction, a purchaser may be asked to pay a higher purchase price in order to extend the original contract or obtain a new contract. There is also a risk that the developer may not agree to an extension or new contract and instead sell the unit to another purchaser. Purchasers who initially sought legal advice on their pre-sale contract will be aware of any potential termination dates or may return to their lawyer for clarification of the options available. Prospective purchasers who wish to complete their purchases should, with the appropriate professional assistance, seek a written extension of their pre-sale contract before the termination date set out in that contract.

Delays in development may require prospective purchasers to arrange temporary accommodation or delay moving from their existing homes. As delays that occur in a rising market may also be accompanied by price increases, prospective purchasers should consider how to invest their purchase monies during that time so as to keep pace with any increase in real estate prices. For example, if an existing home is to be sold to fund the purchase of a proposed unit, the homeowner may wish to delay the home sale and use any increase in the home’s value to help fund the ultimate purchase of the proposed unit. There is also a risk that real estate prices may decline in the future. If the developer completes a pre-sale contract within the time set out in the contract, the purchaser may be obligated to complete the purchase at the agreed price, even though the real estate may have declined in value. If a purchaser fails to complete the purchase, the specific terms of the contract may authorize the developer to not only keep the deposit but also pursue other legal remedies. Such remedies may include legal action to seek compensation from the purchaser for any losses beyond the amount of the deposit, or actual performance of the contract. A purchaser may wish to assign the contract to another purchaser prior to the completion date. Depending on the specific terms of the pre-sale contract, assignments may not be permissible, or may require a substantial assignment fee to be paid to the developer. The risks associated with pre-sales apply to a new purchaser who is assigned a pre-sale contract.

Additionally, depending on the specific terms of an assignment, the new purchaser may not recover any payments made to the initial purchaser and developer to allow the assignment. A pre-sale contract may allow the developer to substitute equivalent materials or make adjustments to the layout of the unit or the development. In the current real estate market, purchasers at several developments have had their pre-sale contracts terminated and this has led to complaints about some of the risks that are described above. It is important for all prospective purchasers to appreciate those risks in order to better understand any existing pre-sale contract and make a more informed decision about whether or not to enter into a pre-sale contract.

Deposits

The ability of developers to hold deposits is prevented by the Real Estate Development Marketing Act — will open in a new tab. The Real Estate Development Marketing Act requires that a developer, who receives a deposit, must place the deposit with a brokerage, lawyer or notary public, who holds the money as a trustee for the developer. The trustee holds the funds on deposit for the developer and purchaser and not as agent for either of them.

The deposit may only be released as follows:

if the money was paid into the trust account in error;

to the purchaser with the written consent of the purchaser and the developer;

if the developer certifies that the rescission period has expired, the subdivision or strata plan has been filed, the development may be lawfully occupied, and the purchaser’s interest is either registered or evidenced in an instrument delivered to the purchaser;

if the developer certifies that the rescission period has expired and the purchaser has failed to pay a subsequent deposit and the contract permits the developer to cancel the contract under those circumstances;

if the developer will use the deposit as permitted under the Real Estate Development Marketing Act;

if the purchaser rescinds the purchase agreement within the time provided by the Real Estate Development Marketing Act;

if there are adverse claims to the funds and the trustee pays the fund into court in accordance with section 33 of RESA;

in accordance with a court order; and

in accordance with any regulations under the Real Estate Development Marketing Act.

The Real Estate Development Marketing Act permits a developer to use deposits for purposes related to the development property, including the payment of expenses relating to the construction and marketing of the development, if a developer has obtained deposit insurance (i.e., entered into a deposit protection contract). Before the trustee may pay the funds to the developer, the developer must enter into a deposit protection contract with an insurer and provide an original or true copy of the contract to the trustee. Additionally, the developer must provide notice of the deposit protection contract to the purchaser in the Disclosure Statement.

Remedies and Enforcement

The Real Estate Development Marketing Act — will open in a new tab provides that a purchaser may rescind a purchase agreement within seven days after the later of the date that the purchase agreement was made or the date that the developer received the written statement from the purchaser acknowledging that the purchaser had an opportunity to read the Disclosure Statement.

If a purchaser is entitled to receive a Disclosure Statement but does not receive the Disclosure Statement, the purchaser may rescind the purchase agreement at any time including after the title or other interest has been transferred to the buyer.

Licensees should also be aware that no contract to purchase or lease a development unit is enforceable against a buyer or tenant by a developer who has breached the requirements of the Real Estate Development Marketing Act relating to the requirements for approval, the filing and provision of Disclosure Statements and the handling of deposits.

The Real Estate Development Marketing Act permits the Superintendent of Real Estate to conduct an investigation if the Superintendent has reason to believe that a developer is either contravening the provisions of the Real Estate Development Marketing Act or has failed to comply with an order of the Superintendent. At the conclusion of an investigation, the Superintendent may require the developer, or an officer, director, controlling shareholder or partner of the developer, to attend at a hearing.

At the conclusion of the hearing, the Superintendent may order that the developer pay an administrative penalty of up to $50,000 in the case of a corporation and up to $25,000 in the case of an individual.

Licensees must be particularly careful when acting as an agent of a developer that they ensure compliance with the requirements of the Real Estate Development Marketing Act, including the requirement to deliver a Disclosure Statement that plainly discloses all facts and, if the brokerage retains the deposits, that they are only released in accordance with the provisions of the Real Estate Development Marketing Act.

Interacting with a Developer’s Sales Representatives

Sometimes when a licensee working with a buyer introduces that buyer to a new home or strata title project, the developer’s onsite sales team will ask that licensee to hand the buyer over to them. This can happen whether the developer’s marketing team is licensed or employed directly by the developer and not licensed.

The developer and/or its sales team are more knowledgeable about the project and various finishing issues; therefore, they might believe negotiations will be smoother if handled by them. Typically, the licensee who has introduced the buyer to the project is told that he or she will be paid remuneration if the buyer purchases a unit.

Licensees and buyers both need to be aware that their relationship and the buying process will change if this proposal is accepted. First, the buyer will likely not have any agent representing his or her interests in the purchase. Second, when it comes time to write an offer, this will often be done using a contract that has been prepared by the developer’s lawyers. The preprinted clauses in this contract may be more beneficial to the seller (Developer) than those contained in the standard Contract of Purchase and Sale most licensees use. Finally, the buyer may not receive timely advice with respect to appropriate holdback or deficiency provisions.

If a licensee is prepared to hand the buyer over in this situation and the buyer agrees, the licensee should confirm in writing that:

the licensee will be receiving remuneration from the developer if the buyer purchases;

there is a change in the agency relationship, and the nature of the agency relationship, if any, the licensee will be providing; and

the buyer should seek independent legal advice before signing a contract to purchase.

A final note of caution. Sometimes after this has taken place and the buyer is in the midst of negotiations or concerned about something, that buyer will contact the licensee for advice. Licensees need to be careful not to step back into the role of the buyer’s agent unless they are ready, willing and able to accept that responsibility. It may be more appropriate to refer the buyer to his or her lawyer or the developer’s sales team.